Some schools absorbing higher milk prices

Cereal eaters and household grocery shoppers know that a gallon of milk now costs about as much as a gallon of gasoline.

"Right now a gallon of milk ranges from $2.89 to $3.19; a month ago they were 40 or 50 cents cheaper," said an employee at Tops in Canandaigua.

Area schools with cafeterias are feeling the pinch as well, though many say they will absorb the higher price-per-carton rather than passing the cost on to students.

"We're going to try to hold the price for students, even though our cost is up about four cents per carton from last year," said Donna House, an interim business official with the Marcus Whitman Central School District.

The Phelps-Clifton Springs Central School District will not raise milk prices for students this year either, said food service director Beverly VanEtten.

Schools in the district will still charge 50 cents per carton, though the school now pays 20 cents per carton, up from 16 cents last year.

"We haven't raised the prices in two or three years," said VanEtten, adding that the school might raise prices for students next year if milk costs continue to climb. The higher milk prices alone will not affect the price of a complete lunch - that price is determined by a number of factors including vendor bids, school budget and labor costs, she said.

Schools buying milk from the Wayne County-Finger Lakes Cooperative Bid can choose from two payment options, explained Todd Fowler, the Bloomfield Central School District's Director of Food Services. There's the base price option, where the price the school pays per carton stays constant throughout the year - about 20 cents in 2007-2008 - then there's the fluctuating price option, where the price varies based on ebbs and flows in wholesale prices.

Bloomfield, which uses the base price option, will not increase prices for students this year either, Fowler said.

Naples schools will not raise their milk prices this year, either, said Ted Welch, assistant superintendent of business and operations for the district.

Even if milk costs continue to rise, the schools wouldn't make a price change mid-year, he added.

The Canandaigua City School District, by contrast, has left the window open for a mid-year price increase, said Andy Thomas, the school's community relations director.

"The rise in milk prices has taken place over a relatively short time," said Mark Stephenson, senior extension associate with the Cornell Program on Dairy Markets and Policy. This July, New York dairy farmers received an average of $22.10 per hundredweight - the standard industry measurement for liquid milk, representing about 100 pounds or 11.6 gallons. That's up $1.80 from June 2007 and up $9.80 from July 2006, according to U.S. Department of Agriculture reports.

Stephenson cited a number of supply-side factors as causes for the price increase. First, federal subsidies on corn grown for ethanol production have increased dairy farmers' feed costs, limiting the number of milk cows they can keep. Second, the weak U.S. dollar has made American milk "look like a good buy" to the rest of the world, so that a larger-than-normal share of U.S. milk is exported. Third, the world milk supply has been short, due to a three-year drought in Australia and New Zealand and reduced milk exports from Europe, he said.

Determining the minimum price buyers can pay dairy farmers for their milk is a complicated process. The National Agricultural Statistics Service, a division of the U.S. Department of Agriculture, first surveys dry milk, butter, cheese and whey producers to see how much it costs them to produce their goods, said Blair Smith, deputy director of the NASS N.Y. field office in Albany. Then, the Agricultural Marketing Service, another U.S.D.A. agency, uses a formula to impute the average cost of the liquid milk that went into making those products, said Stephenson.

Actual milk production in New York was up in July, although the total number of dairy cattle - 626,000 head - was down 10,000 from last July, according to U.S.D.A. reports. Production was up because each cow is, on average, producing more milk - 1,645 pounds this July, up 40 pounds from last year.

Because of the increase in production, the U.S.D.A. expects prices to plateau this year and ease slightly next year.

That reasoning makes sense, said Stephenson. He thinks prices will settle from this year's spike but will always be higher than they were in the last decade.

Hilary Smith can be reached at (585) 394-0770, Ext. 343, or at
hsmith@mpnewspapers.com.